This document provides an overview of contract law, defining a contract and outlining the basic elements required for any contract to be valid. It discusses the requirements of mutual assent (offer and acceptance), consideration, legality, and capacity. It also describes different types of contracts, including unilateral and bilateral, executory and executed, void and voidable. Technical contracts like negotiable instruments are also mentioned. The key elements that must be present in any legally binding contract are an offer, acceptance, consideration, capacity of the parties, and a legal purpose.

1. Business Law
Chapter 1:
An Introduction to Contracts

2. What is a contract?
• The legal definition of a contract is a
promise (or set of promises) that, when
breached by one party, gives the other
party a legal remedy.

3. Technical contracts
• These contracts have formal
requirements and are often governed
by specific statutes. Examples of these
technical contracts are:
∀ Negotiable instruments
∀ Letters of Credit
• Contracts “under seal”

4. The Basic Elements of all
Contracts
• Mutual Assent: (a valid offer and
acceptance)
• Consideration
• Legality of subject
• Capacity

5. Mutual Assent
• Mutual assent is the final product of a
valid offer and acceptance.
• Also often referred to as “meeting of the
minds”

6. Offer
• An offer is an expression by a party
(usually called the offeror) that he or
she is willing to enter into a bargain

7. The Power of Acceptance
• The power of acceptance refers to the
right of the person receiving the offer to
accept it and create a binding contract.

8. Offers can be made by words, by
actions, or any combination of both
• An offer can be made without any
words at all.

9. How long is an offer valid?
• An offer expires by its own terms, or
after a reasonable period of time.
• A ‘reasonable period of time’ depends
on all of the surrounding circumstances
in a particular case.

10. Acceptance
• A valid offer creates the power of
acceptance in another.

11. Communicating an acceptance
• The person accepting the offer (the
offeree) must communicate this
acceptance to the offeror.

12. The Mailbox Rule
• This rule states that an acceptance is
legally effective when it is deposited in
the U.S. postal system.

13. Can a person accept by
silence?
• Actions alone can indicate acceptance.

14. Terminating the power of
acceptance
A person’s power of acceptance can be
terminated by:
• A revocation of the offer by the offeror
• A rejection of the offer by the offeree
• Lapse of time
• Death or subsequent incapacity of either
party
• The failure of a required condition

15. Counteroffers
• Counteroffers are new offers, not an
acceptance of the original offer.

16. Language required to create a
contract
• There is no magic formula of words that
must be used in order to create a
contract.

17. Consideration
• The basic reason for a contract; a
person gives up something of value in
exchange for receiving something of
value through the contract.

18. Capacity
• When a person has legal “capacity”, it
simply means that he or she has the
legal authority to enter into binding,
legal agreements.

19. Subject of contract
must be legal
• A contract that involves illegal activity
will not be enforced through the court
system, for obvious reasons.

20. Types of Contracts
• There are many different types of
contracts.

21. Classifying a contract by
performance
• Contracts can be classified by the
manner in which the parties fulfill it.

22. Unilateral contracts
• Unilateral Contract: A contract in
which one party makes a promise in
exchange for an action by the other
party.

23. Bilateral Contracts
• A bilateral contract involves a promise
in exchange for another promise.

24. Executory and executed
contracts
• An executory contract is one that has
not yet been completely performed.
• An executed contract is one in which all
required actions have been completed.

25. Void and voidable contracts
• A “void” contract is a contract that is
invalid.
• A void contract cannot be enforced.
• A voidable contract is a contract that
could be invalidated, but has not yet
been ruled void.

26. The Statute of Frauds
• The Statute of Frauds is a statute that
requires certain types of contracts to be
reduced to writing before they are
considered legally enforceable.
Thank you!
Dr Marcelo Gomes Freire